FTA Colombia - USA

Opportunities for investment

Opportunities for investment

According to some of the most influential media in the world, Colombia is nowadays considered as a ‘jewel” for foreign investment. In 2011, Colombia was the fifth country in the world in terms of foreign direct investment growth, and the first in Latin America that most protects foreign investors. It offers investment opportunities in BPO, software and IT services, free trade zones, biofuels, oil goods and services, private equity funds, automotive and autoparts, among others.

Colombia is now reaching a leading position amongst these nations, due to the trust and credibility created by the growth of its economy in the last decade.

International reports emphasize the good conditions of Colombia. In 2011, the country reached the fifth place in Direct Foreign Investment in the world, according to the United Nations Conference for Commerce and Development. Investment grew from $6.8 million USD in 2010 to $13.234 million USD in 2011, a record in the country's economy exceeding the objective set for 2014.

In the recent Global Competitiveness Report, the World Economic Forum placed Colombia in the fifth global position in the category of best protection for investors. Also, the World Bank's Doing Business report of 2012, places Colombia as the third best country in Latin America and the Caribbean to do business and for investment.

Cosmetics and Personal Care

Colombia has important competitive advantages that make it a strategic place to cover the Latin American market. These advantages range from an excellent geographic location for reaching other markets, to the variety of plants in Colombia (a country with the greatest biodiversity per square kilometer on the planet). It is all underpinned by one of the largest cosmetics industries and with the most significant growth in the region.

Production Opportunities

During the last decade, the market in this Colombian sector has surpassed twice its size, reaching US$6.235 billion in 2010 according to Euromonitor, thus becoming the 5th largest market in Latin America.

Production in the cosmetics sector has doubled in the last 10 years, reaching levels close to US$3 billion. Source: ANDI Colombia (National Industrials' Association).

According to the Colombian Labor Observatory, over 100,000 professionals and technicians are available to work in the cosmetics industry.

Opportunities to Create a Logistics Hub

The best location, equally distant from Canada and Argentina, with several trade agreements in place with this countries

Colombia expects to have 11 Free Trade Agreements closed by 2011, which would give access to approximately 1.5 billion consumers.

With over 3,700 ocean-freight and over one thousand air connections, Colombia offers excellent export logistics.

Make-up and toiletries sales increased six times in the past 10 years, moving from US$114 million to US$683 million.

Over four large ports to cover the Pacific and Atlantic markets.

Opportunities to establish research and development centers

Colombia is the country with the most biodiversity per square kilometer, with over 50,000 known plants, of which 18,000 are endemic, according to Earth Trends.

Intellectual property protection abiding by international standards, granting exclusivity of 20 years to patent holders.

Tax incentives like income tax deductions equivalent to 175% of the value invested in Research and Development (not to exceed 40% of liquid profit).

Three Research and Development Centers supported directly by the Government (Colciencias) for research in biological use, biotechnology and bioinformation.

Region

Know the principal regions that present opportunities of investment in the sector of Cosmetics and cleaning products:

Automotive Industry

Colombia is the 4th producer of vehicles in the region (131,510 units in production, and a market of 324,570 units approximately). In addition, there is large potential for growth because the number of vehicles per inhabitant in the country is very low. Despite having a population similar to the Argentinian, we only have a third of the number of cars in that country.

Auto parts manufacturing

Light vehicles, buses and trucks are assembled in Colombia, as well as motorcycles and multi-purpose vehicles like garbage trucks, ambulances, and security vehicles, among others. This has allowed some TIER 1 (First tier auto parts entrepreneurs) from the industry to choose Colombia to provide for both OEM (Original Equipment Manufacturers) as well as the spare parts market. This boom in the industry requires the presence of new world-class players.

Given its tradition of nearly 60 years, the automotive industry now allows nearly 15,000 graduates (both technicians and professionals) to have jobs with competitive salaries, which makes this a distinguishing element for this industry.

Region

Know the principal regions that present opportunities of investment in the Automotive industry:

Building Materials

Production Opportunities

Construction dynamism in Colombia, with an increase of over 100% in the past 9 years' GDP and a growth of 29% of foreign investment in the past 6 years, making it the main driver for construction materials.

In 2010, civil works increased by 39%, buildings by 29% in approved licenses, and the hotel industry by 148% (Source: DANE, Camacol).

Positive behavior with composite growth in exports of 16%, and an increase of 78% in investments. (Source: DANE).

Between January and June 2011, housing sales grew by 18% compared to the previous year, highlighting non-VIS with 26% and VIS with 9%, reaching a total of 56,859 units sold. (Source: Camacol, Portafolio, July 25th).

Within the 2014 Government Development Plan, there are 5 so-called “Government Locomotives”, among which are housing (the goal is to build 1 million low-income houses) and infrastructure (Construction and remodelling of airports, ports, roads, etc.), which generate a growing demand for low, medium and high quality construction materials. (Source: Ministry of Finance and Public Credit).

Competitive logistics environment thanks to the fact that the country is a forced corridor for ocean shipping companies covering the North-South-North routes, and its proximity to the Panama Canal, which facilitates East-West interconnections and access to both oceans.

Over 3,700 ocean frequencies. 75% of all ship companies in the world (about 15 of the most important ship companies and with the most traffic) dock in Colombian ports.

Low ocean freight shipping costs compared to the region for general cargo shipping towards North American, South American and Central American markets.

Region

Knows the principal regions that present opportunities of investment in the Building Materials Industry:

Creative Industries

Colombia is an extremely diverse country, with a unique variety of locations, high availability of human resources at competitive costs and a strategic location, therefore becoming attractive for celebrities from film and television industries to visit, just a few hours away from the United States.

Opportunities for recording studios and content development for the film, television and media industries

Colombia is one of the five countries in the world considered as mega-diverse.

Locations: there are ecosystems covering all the way from snow peaks, tropical rainforests, moorlands, large valleys, two oceans, deserts, countless rivers, lakes, lagoons, and thousands of plant and animal species.

Colombian television is currently exporting its products successfully to the United States, Mexico and Costa Rica, among others.

Over 45 thousand graduates per year from technical and professional careers related to the creative industries (Ministry of Education, Colombia).

Academic training programs in high-level audiovisual animation and production, according to the National Learning Service (SENA).

Competitive wages in the region for engineers and technicians. US$9,714 per year for an Electronic Engineer and US$10,548 per year for an Audiovisual Technician (Salary Expert).

Hotel and Tourism Infrastructure

Colombia is the best option for developing hotel projects in Latin America: foreign tourism in the country has grown faster than the world average, attractive investment incentives, strategic and privileged location in the continent, extended international connectivity and a market that allows high profitability rates.

Corporate tourism opportunities

Seven cities with high corporate dynamics and multiple growth poles.

In only four years, Colombia went up 17 positions in the ICCA (International Congress and Convention Association) ranking, moving from position 50 to 34.

The ports' cargo capacity will double in the next few years.

Over 2,500 multinational companies installed in the country.

Increased number of international events. Over 7,000 visitors in the past three years in events like the General Assembly of the World Tourism Organization, the annual leaders' meeting of the Latin American and Caribbean Air Transportation Association (ALTA), the XXXVIII General Assembly of the Inter-American Development Bank (IDB) and the World Economic Forum for Latin America (WEF).

Cities to invest in business tourism and events: Bogota, Cartagena, Barranquilla, Cali, Bucaramanga, Pereira and Cucuta.

Holiday tourism opportunities

Colombia: A Revelation Destination" according to communications media like Lonely Planet, Wanderlust and The New York Times.

Colombia is a multi-destination country: it is an Andean, Caribbean, Amazon and Pacific country.

Great variety of tourism products like:

Sun and Beach

2,900 km coastline, equivalent to the entire Central American coastline.

Very little offering of "all inclusive" resorts and hotels in the country.

History and Culture

Colombia has been awarded with ten worldwide recognitions by the UNESCO.

Over 80 ethnic groups with more than 65 languages.

Nature Tourism

10% of the planet's flora and fauna are in Colombia, in spite of the fact that its geographical extension is only 1% of the earths' surface.

Paradise for birdwatchers, with 1,885 species, Colombia is number one in the world.

Eleven million natural hectares are protected, equal to the sum of the surface areas of Costa Rica and Panama.

Information and Communication Technology Sector

Colombia offers high availability of qualified human resources at competitive costs, a flexible labor regime, a world-class technological infrastructure, competitive
operation costs and a strategic location where the time zone becomes an advantage to provide nearshore and offshore services.

Opportunities to create shared services centers for Latin America

Over 78 thousand graduates per year from technical and professional careers related to the areas of management and engineering, according to the National Ministry of Education, Colombia.

Third country with the best University Education in Latin America, according to IMD (126 universities and 203 higher education centers).

Strategic geographical position in the center of the continent and short connection times: 3:40h from Miami, 5:30h from New York and 5:45h from Sao Paulo.

Colombian connectivity enables the establishment of shared service centers, thanks to the 120% increase of international flights into Colombia since the year 2000.

Competitive salaries in the region for managers, accountants, engineers and economists. US$950 per month for economists and US$980 for systems engineers. (Source: Salary Expert).

Scalability of eight cities with over 500,000 inhabitants.

Flexible labor market: lowest dismissal costs in Latin America.

Located in the middle of five time zones, thus enabling services to the main cities in the continent without the need to pay overtime hours.

Cultural affinity with the continent's development centers.

Telecommunications infrastructure: five submarine cables generating a bandwidth of over 550 Gbps. (Source: Ministry of Information)

Software and IT Services - Information Technology and Communications

Colombia has a broad knowledge and experience in software development thanks to the high number of Systems Engineering graduates. Moreover, a flexible labor regime, a technological infrastructure that allows IT Service companies to establish anywhere in the country and a strategic location, promote companies' interest in developing and integrating applications in Colombia.

Private Equity Funds

Colombia has become an excellent platform for the development of the private equity funds industry in Latin America. Its political and legal stability, together with the excellent behavior of its economy, have enabled Colombia to continue increasing positions according to LAVCA (Latin America and Venture Capital Association) and to improve its business environment for this industry.

Opportunity for the creation of Private Equity Funds in Colombia

Attractive regulatory framework for the creation of funds in Colombia: entry and exit of capitals in Colombia through agile and easy activity by the Central Bank.

Through the enactment of Decree 2175 of 2007 (Currently, Decree 2555 of 2010), the interest and development of this industry has been notorious. To date, there are 21 closed funds with capital commitments of US$2.2 billion.

Potential for growth of the industry: according to the 2011 Preqin Global Private Equity Report, Colombia represents 5% of the funds industry share in Latin America in terms of fundraising, and this in turn only represents 4% of the global industry.

Multi-sector investment opportunities

According to Fedesarrollo, Colombia expects a growth rate around 5.5% in 2010, higher than the world economy growth forecast of 3,4%. This growth has been leveraged by diverse sectors from our economy, such as: Services (16,9%), Financial Establishments (20,9%), Industry (14,4%), Agriculture (7,1%), Trade (8,1%), Construction (7,1 %) and other sectors (19,2%).

Government support through the "Bancoldex Capital" Program to invest in private capital funds in Colombia.

Excellent behavior and growth of Colombian pension funds during the past few years. According to the Colombian Pension Funds and Severance Administrators' Association, the average annual growth since 2003 has been 27%, which represents capital alternatives to invest in Private Equity Funds (PEF) in Colombia.

The integration of the Colombian, Chilean and Peruvian Stock Markets represents excellent diversification alternatives for investors and more access to capital markets as funds outflow strategies.

Opportunities for investment and co-investment with private equity funds created in Colombia

Actually, there are around 15 initiatives which in total add up to US$776 million, which are in the capital raising process, focusing on sectors like: mining, hydrocarbons, health, services, finance and logistics.

Knowledge transfer from the investment experience of Colombian funds for a more efficient search of investment opportunities. US$600-800 million in committed capital to date, according to Brown University.

Colombia offers competent and highly professional human capital, which shows the quality of Colombian capital funds.

Region

The funds of The Private capital present opportunities of investment in all the regions of Colombia: